Kenya: France Telco to Recall Telkom Kenya Expatriate Executives

Senior executives seconded from Telkom Kenya's parent firm are set to leave the company by September as part of a deal with the Kenyan government, its minority partner in the business.

Top on the list of expatriates on their way out is chief executive Mickael Ghossein, who has been at the helm of the firm since 2009.

According to the Business Daily, people familiar with the matter said France Telecom, which owns 70 per cent of Telkom Kenya, agreed to loosen its grip on the Kenyan firm at a meeting with Treasury officials in Paris last week.

Though Telkom officials say the move is in response to the Government's demand for better representation in the management of the company, some see it as the initial steps in France Telecom's stated intention to sell its stake in the business, which has not made a profit after nearly eight years in their hands and billions of shillings in investment.

"There will be some strategic changes in the management team, with the tours of duty of some of the expatriates coming to an end," said our source.

Telkom has only four Kenyans in the 12-member executive team.

The government, which owns a 30 per cent stake in Telkom, has since 2012 been pushing for the appointment of locals to the company's executive suite but Mr Ghossein has several times denied knowledge of such demands.

The government's argument has been that Telkom's poor performance over the years was the result of its heavy reliance on expatriates at senior levels who do not understand the dynamics of the local telecommunication market.

"We need to change the business orientation from control by people from France who haven't understood the local business environment," former finance minister Njeru Githae said months before he left office in April last year.

Kenyans in Telkom's C-suite are chief carrier service officer George Kebaso, chief of mass marketing Isaac Muthama, chief legal and regulatory affairs Ivy Ngana and the head of corporate communications George Mlaghui.

The acting chief human resources manager Anne Kariuki completes the list of Kenyans in the telco's top management.

'Kenyanisation' of the company's executive suite will start with the expiry of the expatriates' contracts in September, and their replacement with Kenyan nationals.

Expatriates on international duty typically serve between three- to four-year terms and sources said nearly half of the Telkom expats will have their contracts expire before the end of the year.

"The replacement strategy will be a 'Kenyanisation' of most of these positions, as the company continues to strengthen local capacity which has been part of its overall strategy from the very onset," said our source.

The impending shakeup is the culmination of several attempts by the government to reboot the company, whose revenues dipped to Sh9.7 billion last year from Sh10.2 billion the previous year.

It made Sh9.2 billion in 2011 and a Sh18 billion net loss in 2010, which management blamed on the price war in the voice calls market where tariffs dropped by half.

The reorganisation of Telkom Kenya that began with its privatisation in 2008 has been billed as the most expensive corporate venture in Kenya having consumed Sh119 billion in the past seven years.

The process began in 2007 with an Sh85 billion clean-up of Telkom Kenya's books in readiness for privatisation that ended with the sale of a 51 per cent stake to France Telekom for Sh27 billion.

Billions of shillings invested in the company in the subsequent years have, however, not prevented Telkom Kenya from sinking deeper into losses, making it one of the worst investments for France Telecom in Africa.

In 2012, the Treasury -- through Mr Githae and then information permanent secretary Bitange Ndemo -- sought a reorganisation of the company's executive suite and trimming of its payroll costs, pegging the release of the Sh2.5 billion that the government of Kenya was to inject in the firm.

Conversion of Telkom Kenya's Sh20 billion shareholder debt into equity and the failure of the Treasury to participate in a recent Sh10.9 billion rights issue cut the government's stake in the firm by 19 percentage points, leaving the majority shareholder France Telecom with more than two thirds of the ownership.

Telkom Kenya said it needed additional funds to support operations, financing and capital spending. More recently, the huge losses have forced the company to rely on shareholder and bank loans for its operations. Telkom Kenya in April said it needed up to Sh30 billion in capital injection to get back on track.

"We still have cash issues; we are developing the company and we need funds to continue doing this," said Mr Ghossein. "We need between Sh10 billion and Sh30 billion but I cannot give you the exact figure since it is not my duty to negotiate for cash."

Telkom Kenya's borrowing to finance a capital-hungry business in a high interest rate market has proved unsustainable, prompting a balance sheet restructuring that has included the intended sale of some stake.

The reorganisation comes on the back of the firm's effort to cut its wage bill that has seen it freeze new hiring, choosing to only replace those leaving through natural attrition.

Telkom Kenya has about 1,700 employees earning more than Sh1.2 billion annually, according to the firm's management. The company has retrenched about 15,900 workers in the past seven years.

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